Friday preview: Berkeley Group's first half earnings, US non-farm payrolls

1st Dec 2016 13:40

(ShareCast News) - Berkeley Group is expected to report healthy growth in first half earnings on Friday as the property developer benefits from continued high demand and margins.Deutsche Bank expects nominalised pre-tax profit to jump 45.2% to £351.7m compared to the same period a year earlier on a 21.9% increase in revenue to £1.31bn. However, the number of completions is forecast to drop 10.3% to 1,875.The bank said: "The investment case for Berkeley remains complex, juggling the value of more than a 8% yield, against a business which is peaking in the coming two years (pre-tax profit declining from fiscal year 2019 reflecting the mix of its build), but with management guiding to longer term return on equity of 20%. For us, the earnings potential remains undervalued: Buy."While the uncertainty of Brexit is unlikely to support domestic demand in the property market, Deutsche Bank believes a weaker pound will attract overseas buyers.About 40% of Berkeley's customers are from abroad.In a trading statement in September, Berkeley reiterated its guidance for £2bn of pre-tax profit over the three-year period ending on 30 April 2018, supported by record cash due on forward sales of £3.25bn and future estimated land bank gross margin of £6.15bn.Berkeley reported in its full-year results in June that reservations were about 20% lower in the first five calendar months of the year compared to the same period in 2015, as customers adjusted to higher stamp duty and the uncertainty surrounding the EU referendum."However this downside in selling rates should start to annualise out after year end," Deutsche Bank said.In light of Brexit, Berkeley said it has been selective in the land market, acquiring just two sites in the period from 1 May to 31 August.The company also cited challenges including government policy, high taxes and tough barriers to entry for small builders.However, Berkeley said it believes it is well-positioned to deliver its earnings and dividend guidance with a strong balance sheet, forward sales and quality land bank.The group also believes it has sufficient capital to be flexible if new investment opportunities arise.On the economic data front, US non-farm payrolls figures will be in focus. Economists forecast that employers added 175,000 jobs in November with the unemployment rate remaining at 4.9%. A healthy jobs report is likely to raise the odds of an interest rate hike by the Federal Reserve this month.Friday 02 December INTERIMS Berkeley Group Holdings (The) INTERIM DIVIDEND PAYMENT DATE Games Workshop Group, Hargreave Hale AIM VCT 2, Hilton Food Group, Laird, Marshalls, Mission Marketing Group, Octopus Apollo VCT, Scottish Mortgage Inv Trust, UK Mail Group , William Hill QUARTERLY PAYMENT DATE Boeing Co INTERNATIONAL ECONOMIC ANNOUNCEMENTS Non-Farm Payrolls (US) (13:30) PMI Construction (09:30) Producer Price Index (EU) (10:00) Unemployment Rate (US) (13:30) FINALS Urban&Civic ANNUAL REPORT LXB Retail Properties SPECIAL DIVIDEND PAYMENT DATE Best of the Best, Octopus Apollo VCT, Octopus Eclipse VCT 1 EGMS Public Joint Stock Company Severstal GDR (Reg S) AGMS AXA Property Trust Limited, DFS Furniture, Quadrise Fuels International FINAL DIVIDEND PAYMENT DATE Abcam, Ashmore Group, Genus, James Halstead, Kier Group, Manchester & London Investment Trust, Swallowfield